What Goes Up Must Come Down

Oh, what's this? A nice rah-rah piece on Amtrak, that suck-hole of tax dollars and inept provider of passenger transportation, courtesy the Lafayette Journal-Courier:

Recent spikes in gasoline prices, airport congestion and environmental awareness are among the reasons why Amtrak is reporting record ridership for the 2008 fiscal year that ended Sept. 30.

Nationwide, Amtrak carried 28.7 million people this year, compared to 25.8 million in 2007. That was an 11 percent increase.

So, since the gasoline prices are now lower than when Hurricane Katrina hit the Gulf Coast, back in August 2005, ridership will certainly have already begun to tank, if it were such a factor in driving an increase in ridership. I love this quote from a rider:

"We're students and we're poor," she said with a chuckle, noting the train's comparatively cheap cost.

A round trip ticket between Lafayette and Chicago generally runs between $30 and $50 depending on the days, according to Amtrak's Web site.

Well, poor student, you aren't learning mathematics at Purdue, that's for sure. With gas now around $2/gallon, even if you drive a Hummer or some other beast that gets 10mpg, you can drive from Lafayette to Chicago for $25.20.

126 mi / 10 mpg = 12.6 gal x $2 = $25.20

You're going to be poor for a lifetime if you can't do the math. Amtrak isn't the solution. Oh? Riding for the environment? Ok, then calculate the ride in my Toyota Corolla:

126 mi / 40 mpg = 3.15 gal x $2 = $6.30

Seriously. What kind of stupid do you have to be to lap up what this article is offering?

Update: In response to the astute comment that caught where I didn't (shame on me!) that the Amtrak pricing is based on round trips, and my car pricing is based on a single leg, I decided to shore that up. Doubling my auto prices is the easy part:

252 mi / 10 mpg = 12.6 gal x $2 = $50.40
252 mi / 40 mpg = 3.15 gal x $2 = $12.60

I went to Amtrak's website to see the various prices. Turns out that the article is wrong. One cannot get a $30 round trip fare. It varies pretty significantly depending on the days of departure and arrival.

$36 - Depart Lafayette Nov 19 or 20, Return from Chicago Nov 24
$41 - Depart Lafayette Nov 19 or 20, Return from Chicago Nov 22 or 25
$52 - Depart Lafayette Nov 21, Return from Chicago Nov 23 or 26
$58 - Depart Lafayette Nov 19 or 20, Return from Chicago Nov 22 or 25
$67 - Depart Lafayette Nov 21, Return from Chicago Nov 23 or 26

So, the J-C's range of 'generally between $30 and $50 for a round trip' is misleading. You can't get a fare as low as $30, and most combinations are more than $50.

I guess we're both shoddy journalists, quick to make our points. In any case, my ride in the Corolla is still WAY cheap.

Gas Prices & Chicago Taxes

(Valparaiso, IN)- It's been interesting to note gas prices over the past two weeks, as they've been dropping. One thing that remains is that there is a huge difference between what you pay in Chicago and anywhere else. Here's what I've observed, and what I've paid for regular unleaded in the past two weeks:

9/18, Chicago: $4.60/gallon

9/21, Fishers, IN: $3.69/gal

9/22, Rock Island, IL: $3.74/gal

9/23, Prairie du Chien, WI: $3.56/gal

9/24, Viborg, SD: $3.29/gal

9/25, Western Nebraska: $3.14/gal

9/26, St. Louis, MO: $3.39/gal

9/27, Fishers, IN: $3.53/gal

10/1, Fishers, IN: $3.39/gal

10/4, Fishers, IN: $3.24/gal

10/5, Lebanon, IN: $3.18/gal

10/6, Joliet, IL: $3.79/gal

10/7, Blue Island, IL: $3.78/gal

10/7, Valparaiso, IN: $3.39/gal

Chicago and the adjacent small towns & cities are consistently 60 cents a gallon higher. I make it a point NEVER to buy gas in the Chicago area. Fill up by Merrillville at the latest when going up I-65, as a rule.

Cost of living is certainly one difference to explain it. I imagine taxes are another. What I can't explain is why Chicagoans are good with it.

Update: Three more prices to report from last night:

10/8, Joliet, IL: $3.79

10/8, Gary, IN: $3.36

10/8, Lebanon, IN: $3.07

Really- Why do Chicagoland residents accept being gouged so? It isn't merely on gas prices, but on all prices. I bought in Gary on the drive back. I ran the tank down pretty low to get the heck out of Illinois. At 43 cents/gal difference, on a 12-gallon fill-up, I saved $5.16. Imagine how many times per day this decision is made, and how the Illinois economy suffers, and the Indiana economy benefits accordingly.

Running The Math on Gas Prices

Being that regular unleaded gas is now at $4/gallon, or near enough to it, the price of gas is the issue du jour, I thought I should run the real-life numbers on my own driving, to see what real-life financial impact it has on me. I drive a lot, so the impact should be great. 

The last two years, I've averaged a bit over 30,000 miles/year. I drive a Toyota Corolla, with a five-speed stick. It averages 36 mph, so I stretch the dollar well. In fact, I've slowed down a lot recently, in an effort to improve the mph, but I'll calculate to averages I've actually logged.

So, more or less, I consumed 833.33 gallons of gas in the past two years.

At an average of $3/gallon last year, I spent $2,500.

At an average of $4/gallon this year, I'll spend $3,333.33.

I'm spending $833.33 more this year, or $16.02 a week.

$16 a week? Big deal!

Keep in mind that I drive 30,000 miles a year- for business. Most people drive a whole lot less than me. Before I was doing the kind of work that demanded I drive my own vehicle, I would average a little less than 15,000 miles/year. If that were still true for me, I'd be spending an extra $8/week.

So, why is this such a prominent issue? Is it because the gas stations are the only retailers stupid enough to continue to post their prices on large signs? 

The gas stations really do themselves a disservice with the price signs. I remember growing up in the 70s, when all manner of retailers posted their prices in their windows or on signs. The only ones who consistently do it today are grocers and the gas stations. They make themselves a lightning rod unnecessarily. But maybe they're doing us an even greater disservice. We're bitching about something that really isn't that big a problem, at the expense of examining some bigger issues. 

Our "electable" presidential candidates are talking up this issue, and I'm really not hearing enough about restoring the dollar, cutting the deficit without raising taxes, and the solution for our involvement in Iraq.

Indiana Gas Tax Suspension?

No. Absoultely not. Sound funny coming from a Libertarian? Read on.

Gas taxes are a user fee. If you are using gasoline, you are most likely using the roads. Sure, some of this gasoline is used for lawn mowers and other non-road uses, but that just goes to show you how one-size-fits-all solutions invariably are imperfect.

Here's the main thing about gasoline: The commodity belongs to the people who produce it, until it is sold to the people who agree to buy it at a particular price. Frankly, I don’t believe the producers of gasoline have nearly as much to explain for the variable nature of day-to-day prices as consumers do for their ability to wail and moan without doing a single thing to alter their consumption.

In economics, the phenomenon is called “price elasticity”. In the case of gasoline, the price is highly elastic: it is being shown that consumers are willing to buy the product without regard to price.

It was eye-opening for me to sit in an economics class seven years ago and watch the professor give an impromptu demonstration of price elasticity. The class was mainly comprised of working professionals pursuing an MBA. At the time, gas was about $1.40/gal. He had everyone stand up. He said, “gasoline is now $2/gallon. Sit down if you stop buying”. Nobody sat down. “$3/gallon”. A small handful of people sat down. He increased at $1 increments, and at $6/gallon, almost half the room was still standing. I was also still standing.

In that light, it is entirely possible that gasoline is actually underpriced, and has been for years. The market is bearing these prices, all while being decried as ‘outrageous’. Actions speak louder than words. Truth be told, if gas goes to $8/gallon, I'll still be buying and driving

Also interestingly in this class, there was a group that did their price elasticity project on bus riders. The fare was $1/ride with transfer. They found by surveying actual riders that their average rider surveyed would continue to ride the bus up to about $4/ride.

The conclusions we reached were that people made choices that caused them to be dependent upon transportation. Mainly, they choose to live far from their workplaces.

I have no sympathy for the person who choose to buy an SUV when gas was at $1.80/gal on the assumption the price would never rise, or who argues that because they made that choice, the oil producer and retailer owe them an ever-flat price. Likewise for the person who works downtown and lives in the city. You helped create sprawl? Suffer your commute and its costs!

We are such a society that wants to have its cake and eat it too.

So, to the point- no, the governor shouldn’t suspend the gas tax. The taxes pay for the roads. Saying one is in favor of suspending the gas tax is saying they favor the roads crumbling while promoting their use of them. Short-sighted foolishness.

Doug Masson explains his opposition to suspending the gas tax saying, "that would amount to the State subsidizing oil company profits". I disagree. Suspending the tax would subsidize the choices that make higher prices uncomfortable, such as driving an SUV if you can only marginally afford to do so; or, such as living 40 miles from work.

Price has a function. Higher prices will make people more interested in alternative fuels, smaller vehicles, living closer to work, and walking more.

Don't bemoan the oil companies for selling to willing buyers at any profit margin. Would you bemoan your customers choosing to do business with you at your price? Or, your employer to hire you at your wage?

Get a grip, folks.